United States v. Guaranty Trust Co.

Appeal from the District Court of the United States for the Southern District of New York.

Author: Swan

Before MANTON, SWAN, and CHASE, Circuit Judges.

SWAN, Circuit Judge.

This is an action at law by the United States to recover from Guaranty Trust Company of New York the alleged balance of a deposit account. The complaint alleges that on July 15, 1916, the Government of the State of Russia opened a deposit account with the defendant in New York; that on December 12, 1917, there remained in said account $4,976,722.78, and said sum was then, and still is, owing by the defendant, together with interest thereafter accrued; that on November 16, 1933, the Government of the State of Russia assigned all its right, title, and interest in said debt to the plaintiff; that payment thereof has been demanded by the plaintiff and refused by the defendant. Upon affidavits and depositions before answer, the defendant made a motion to dismiss the complaint under rule 107 of the Rules of Civil Practice of New York and the Conformity Act. 28 U.S.C.A. § 724. The ground of the motion was that the cause of action had accrued to the assignor more than six years prior to the assignment and, therefore, the remedy of the assignee was likewise barred by the state statute of limitations. Civil Practice Act N.Y. § 48. United States v. Buford, 3 Pet. 12, 29, 7 L. Ed. 585. Under the law of New York an unequivocal repudiation of liability by the bank would start the running of the statute as against a private litigant. Tillman v. Guaranty Trust Co., 253 N.Y. 295, 171 N.E. 61. The District Judge found that the defendant had unequivocally repudiated its liability as early as February 25, 1918. On that date the defendant closed the account, charging against it sums which were claimed to be owing to Guaranty Trust Company by the State of Russia as successor under nationalization decrees of banks in Russia whose assets had been confiscated. The District Judge also found that notice of such repudiation was received prior to June 30, 1922, by Ambassador Boris Bakhmeteff and by Mr. Serge Ughet, financial attache and charge d'affaires, who at the time were recognized by our State Department as the accredited representatives of the State of Russia in this country. Accordingly, the defendant's motion was granted. From judgment dismissing the complaint upon the merits the plaintiff has appealed.

The question whether a foreign sovereign is affected by a state statute of limitations is one upon which no direct authority has been found. It is, of course, settled law that a state statute of limitations cannot bar the United States. Davis v. Corona Coal Co., 265 U.S. 219, 44 S. Ct. 552, 68 L. Ed. 987. Whether a foreign sovereign might be barred was left open in French Republic v. Saratoga Vichy Spring Co., 191 U.S. 427, at page 437, 24 S. Ct. 145, 147, 48 L. Ed. 247, where Mr. Justice Brown remarked:

"It is said, however, that the doctrine of laches has no application to the neglect of the government to pursue trespassers up on its rights, and that the French Republic is entitled to the benefit of that rule. It is at least open to doubt whether the maxim nullum tempus, applicable to our own government, can be invoked in behalf of a foreign government suing in our courts. The doctrine is one of public policy, and is based upon the assumption that the officers of the government may be so busily engaged in the ordinary affairs of state as to neglect a vindication of its interests in the courts. Whether this exemption can be set up by a foreign government in the prosecution of suits against our own citizens -- in other words, whether the latter are not entitled to the benefit of the ordinary defenses at law -- is a question which does not necessarily arise in this case, and as to which we are not called upon to express an opinion."

In United States v. Nashville, etc., R. Co., 118 U.S. 120, 125, 6 S. Ct. 1006, 1008, 30 L. Ed. 81, there is a dictum that the principle of public policy, which forbids that the public interests should be prejudiced by the negligence of the officers or agents to whose care they are confided, is "applicable to all governments alike." See, also, United States v. Thompson, 98 U.S. 486, 489, 490, 25 L. Ed. 194. On the other hand, in Lehigh Valley R. Co. v. State of Russia, 21 F.2d 396, 400 (C.C.A. 2), this court referred to the duty of Mr. Ughet to continue the suits for the State of Russia and to avoid delays "which would give rise to the bar of limitation to sue." If Mr. Ughet had authority to continue a suit on behalf of the State of Russia, as we there held, it seems clear that he would have had authority to commence a suit on behalf of the State of Russia against Guaranty Trust Company after learning of its repudiation of liability on the deposit account. But it does not follow that his failure to do so for a period of six years would operate as a bar against the foreign sovereign. The statement on the subject of limitation in the Lehigh Valley Case was purely dictum.

The defendant relies also upon Western Lunatic Asylum v. Miller, 29 W. Va. 326, 1 S.E. 740, 6 Am. St. Rep. 644, where it was held, on the assumption that the plaintiff and the Commonwealth of Virginia were one and the same, that the suit was barred by the statute of limitations of West Virginia. See, also, United States v. Brown, 247 N.Y. 211, 218, 160 N.E. 13; Commissioners of the Sinking Fund of Louisville v. Buckner, 48 F. 533, 536 (C.C. Ky.). It is argued that there can be no distinction between applying a limitation statute to another state of the Union and applying it to a foreign government, but we are not prepared to accept this conclusion in view of the complete power over international affairs which is vested in the national government. See United States v. Belmont, 57 S. Ct. 758, 761, 81 L. Ed. , where it is said that such power cannot be subjected to any curtailment or interference on the part of the several states. If a state Legislature should declare that a particular foreign sovereign could not sue in the courts of the state on claims over one year old, such a declaration of state policy would clearly be an invalid encroachment upon the federal power to recognize such government on the basis of equality with other foreign powers. While the matter is less clear when the state legislation treats all suitors alike, nevertheless any limitation statute, if applied to foreign governments, will impose upon the sovereign vicarious responsibility for the neglect of his agent in the United States promptly to bring suit to enforce his sovereign's right of action. The principle that a sovereign ought not to suffer from the negligence of his officers and servants cannot, we believe, be abrogated by state legislation with respect to a foreign sovereign any more than it can with respect to the United States. See Gibson v. Chouteau, 13 Wall. 92, 99, 20 L. Ed. 534. To declare that the principle is applicable to the United States but not to a foreign sovereign is to accord to the latter less than full sovereign rights. Whether a foreign government shall be accorded less than full sovereign rights in the United States is a matter pertaining to international relations over which the national government has complete control. It is true that a sovereign who voluntarily comes into a local court must play the role of a litigant like any other suitor, and is subject to a properly assertable defense of set-off or counterclaim. United States v. National City Bank of New York, 83 F.2d 236, 238, 106 A.L.R. 1235 (C.C.A. 2). That is a matter pertaining to procedure after the sovereign has sought the aid of the court. Here the effort is to charge the sovereign with responsibility for something which occurred before he sought the aid of the court; namely, his agent's failure to seek it more promptly. The rule as to set-off is not controlling as to the defense of limitation.

In our opinion the state statute is inapplicable to a foreign sovereign and the judgment appealed from must be reversed.

MANTON, Circuit Judge (concurring).

This is an appeal by the appellant from a judgment dismissing the complaint on the ground that the statute of limitations of the State of New York ran for more than six years prior to the instituting of the present action.

The action was started on September 22, 1934, by the United States, as assignee on November 16, 1933, of the Government of the Union of Soviet Socialist Republics against the Guaranty Trust Company of New York, for the recovery of $4,976,722.78, with interest thereon from December 12, 1917, representing the balance of a deposit account of the former Imperial Russian Government opened on July 11, 1916, with the appellee.

Appellee claimed, in affidavits in support of its motion of dismissal, that during the years 1918 and 1919 it advised Bakhmetieff and Ughet, the ambassador and financial attache, respectively, of the Provisional Government of Russia -- the so-called Kerensky Government -- that it would not pay the deposit account to the Russian embassy, and this refusal was construed by the appellee as an unequivocal refusal to pay, which, in its opinion, brought into operation the six-year period of limitations, thereby barring the present action.

The appellant replied that facts were lacking from which an unequivocal refusal to pay could be inferred, and that any communications addressed by the appellee to the representatives of the Provisional Government, subsequently to its overthrow in ...

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